Saudi Grain Silos corporation lined up for privatization

The Riyadh Chamber of Commerce and Industry recently urged the Saudi government to sell its holdings in several joint-stock agricultural companies and privatize the state-owned Grain Silos and Flour M

The Riyadh Chamber of Commerce and Industry recently urged the Saudi government to sell its holdings in several joint-stock agricultural companies and privatize the state-owned Grain Silos and Flour Milling Organization (GSFMO).

The chamber recommended that the government put up for sale a 75 percent stake in GSFMO and preserve the remaining shares for a future auction, once the company’s financial standing improves. A second option suggested by the chamber was that the government retain a full-ownership status of GSFMO, while transferring the corporation’s management to the private sector.

The third proposal was that the state-owned GSFMO start purchasing locally grown wheat for unsubsidized market rates. In case local wheat cultivation should consequently prove uneconomical, GSFMO will be converted into a granary for imported wheat, reported Al-Hayat.

GSFMO is the government corporation responsible for setting production targets and assigning production quotas to farmers, buying barley from foreign and local suppliers, managing grain silos—with total storage capacity of 2.4 million metric tons of wheat and 0.2 metric tons of barley—milling wheat and organizing the discharge, bagging and distribution of these grains.

GSFMO’s policy over the past few years has been to target wheat production to meet domestic needs only. Production quotas in 2001 remained unchanged at 1.8 million metric tons for wheat and one million metric ton barley. Production support prices are set at $400 per metric ton for wheat, and $267.67 per metric ton of barley. The GSFMO supplies wheat to local markets with prices ranging between 25 Saudi riyals ($6.6) to SR 35 for a bag of 45 kilograms.

Wheat and barley cultivators receive government support prices only for production within pre-assigned quotas. Farmers, however, grow less than half the government wheat quota a quarter of the maximum barley quantity. Burdened by the rapidly increasing costs of production, Saudi farmers apparently do not find the government support prices attractive enough.

The importation of barley was liberalized in spring 1998. Private traders now import, distribute and sell barley at prevailing market prices. The import duty on barley is zero. Substantial reduction in wheat production subsidies were presented in 1993, however the Saudi government does not yet allow the importation of wheat. — (menareport.com)